Tribune, out of Chapter 11, set to begin makeover as TV company

December 31, 2012|Reuters

By Jennifer Saba and Liana B. Baker

Dec 31 (Reuters) - Tribune Co, which started by publishingthe Chicago Tribune on a hand press in 1847, sees a future inbroadcasting, one not likely to include the major newspapersthat made it a force in the news business.

Now that it has formally emerged from a four-yearbankruptcy, Tribune is expected to concentrate on itsWGN America cable network and a 23-station TV group it tried tofashion into its own broadcast network in the mid-1990s.

Toward that end, Reuters reported earlier in December, thecompany, whose board has been stocked with former TV executives,will soon begin the process of selling off its eight majormarket papers.

Tribune's controlling owners, which include JPMorgan Chase &Co and hedge funds Oaktree Capital Management and Angelo, Gordon & Co, intend to sell most, if not all, of thenewspapers. Tribune has already received expressions of interestin the Los Angeles Times, the Orlando Sentinel and others

Oaktree is the biggest Tribune shareholder, owning about 23percent of the company, while Angelo, Gordon and JPMorgan eachhold a 9 percent stake.

Tribune's papers have been at the epicenter of the newspaperindustry's declining fortunes in recent years. And theirproblems intensified after real estate magnate Sam Zell tookTribune Co private in an $8.2 billion leveraged buyout fiveyears ago.

Over that period, plummeting advertising and circulationhave hit the newspaper industry hard. The industry's ad revenuefell by nearly half to $24 billion, and daily circulation fell10 percent to roughly 40 million copies, according to theNewspaper Association of America.

"What we have seen in the Tribune in the Zell tenure is areflection of the demise of the American metro newspaper and itsuncertain prospects going forward," said Ken Doctor, an analystwith Outsell Research, a consultancy based in Burlingame,California.

Still, the newspaper industry could be reshaped as mogulslike Warren Buffett and Rupert Murdoch seek to build newspaperchains in the United States, even as storied publishers likeTribune and Knight Ridder exit the sector.

Buffett recently said he is interested in adding The MorningCall, a Tribune paper in Allentown, Pennsylvania, to his growingstable of papers.

Tribune's newspapers remain profitable despite the falloffin readers and advertising. Veteran newspaper analyst JohnMorton said the Los Angeles Times could fetch $130 million at anauction, while the Chicago Tribune could garner $86 million.

But with the industry still struggling to find its footing,and depending on the number of bidders, those prices couldfluctuate wildly, Morton said. Newspapers in general have lostroughly two-thirds of their value over the past five years, hesaid.

"Even though the profitability of newspapers is low, if theprice gets low enough it becomes an attractive investment," saidMorton.

"The important thing about the Tribune's newspapers are thatthey are iconic brands in America even though they arestruggling financially. They have a lot of cultural andpolitical power," Doctor said.

NEW OWNERS TO FOCUS ON BROADCAST

Peter Liguori, a member of Tribune's newly created board whoformerly held top jobs at Discovery Communications andNews Corp, is expected to be named chief executive.

Liguori, who has a solid track record in TV programming, isthe kind of executive who should be able to improve WGN'sratings and perhaps help the network command higher carriagefees, said Horizon media analyst Brad Adgate.

The company likely will fashion a strategy around WGNAmerica, a national feed of Tribune's Chicago TV stations thatTribune repackages as a super-station and distributes throughcable and satellite to more than 76 million homes.

Adgate said that WGN America is not "a must buy networkright now," for cable and satellite operators to carry but ithas the potential to reach another 20 million to 25 millionhomes if it adds original programming to its lineup.

"If WGN puts on original shows, whether its reality orscripted, the chance of getting a spike in ratings is higher,"Adgate said.

WGN America collects 19 cents a month for each cable orsatellite home in which it appears, more than Viacom's VHI and BET channels, according to consultants SNL Kagan. WGNcan also sell high priced national ads.

Adgate said WGN already has some programming that isattractive to advertisers, especially its live broadcasts ofprofessional sports in Chicago such as Chicago Cubs baseball and Chicago Bulls basketball.

Tribune also has built digital channel Antenna TV. It nowhas 71 affiliates, including TV stations owned by Gannett and Media General, and delivers broadcasts ofold shows like "Leave it to Beaver," "Barney Miller" and "AlfredHitchcock Presents" that Tribune says reaches more than 61percent of the country.